ROI Calculator

The Core Formula

ROI % = (Net Return - Investment Cost) ÷ Investment Cost × 100

Breaking It Down

Investment Cost

What you paid upfront. Equipment, training, marketing campaign, hiring cost—whatever the initial outlay was.

Net Return

The financial gain from the investment. This is revenue minus costs directly caused by the investment. If you spend £10,000 on ads that generate £30,000 in sales, but those sales cost £15,000 to fulfill (product cost, shipping), your net return is £15,000.

ROI Calculation

(£15,000 - £10,000) ÷ £10,000 × 100 = 50% ROI

What It Means

- Positive ROI: You made money. 50% ROI means you made £1.50 for every £1 invested. - Zero ROI: You broke even. Got your money back but no profit. - Negative ROI: You lost money. -30% ROI means you got back £0.70 for every £1 invested.

Payback Period

This calculator also shows how many months until you've recovered the initial investment. If you spend £12,000 on equipment and it generates £2,000 profit/month, payback period is 6 months.

Why Time Matters

ROI doesn't account for time. 50% ROI over 1 month is amazing. 50% ROI over 10 years is terrible (inflation would erode most of that gain). Always consider the time period.

Equipment Purchases

You're buying a £15,000 machine. It will save £500/month in labor costs. ROI calculation shows: Break-even at 30 months, 40% annual ROI. Worth it? Compare to other uses of that £15,000.

Marketing Campaign Evaluation

You spent £5,000 on Facebook ads. They generated £18,000 in sales with £10,000 in product costs. Net return: £8,000. ROI: 60%. Was it worth it? Should you do it again?

Training Investment

Sending an employee on a £3,000 course. After the course, they bring in an extra £10,000/year in revenue. ROI: 233%/year. Payback: 3.6 months. Obvious yes.

Hiring ROI

Hiring someone costs £50,000 true cost. They generate £150,000 in revenue, with £60,000 in direct costs (materials, time). Net return: £90,000. ROI: 80%. But what if you paid them £40k? ROI jumps to 125%. This shows salary vs value-delivered.

Software/Tools Evaluation

Buying a £100/month tool (£1,200/year). It saves you 10 hours/month. If your time is worth £50/hour, you save £500/month = £6,000/year. ROI: 400%. Clear winner.

Business Expansion

Opening a second location costs £100,000. It generates £200,000 revenue/year with £150,000 costs. Net return: £50,000/year. ROI: 50%/year. Payback: 2 years. Compare to other uses of that £100k.

Comparing Multiple Investments

You have £20,000 to invest. Option A: 30% ROI, 2-year payback. Option B: 50% ROI, 4-year payback. Option C: 15% ROI, 6-month payback. Calculate all three to make an informed decision.

Forgetting to Subtract Costs from Return

The biggest mistake. You spend £5,000 on ads, generate £20,000 in sales, and think ROI is 300%. But if those sales cost £12,000 to fulfill, net return is £8,000, and ROI is 60%. Always use *net* return (profit from the investment), not gross revenue.

Ignoring Time Value

200% ROI sounds great—but over what time period? 200% in 3 months = annualized 800% = incredible. 200% over 10 years = annualized 20% = mediocre (the stock market averages 10%/year). Always specify the time period.

Not Accounting for Opportunity Cost

You calculate 25% ROI on equipment. Great! But what else could you have done with that money? If you could have invested in a different project returning 40% ROI, your 25% investment has a hidden cost—you gave up 15% extra return.

Cherry-Picking Results

You ran 10 ad campaigns. 1 had 150% ROI, 9 had -20% ROI. You highlight the winner and claim "Our ads get 150% ROI!" Dishonest and misleading. Calculate average or overall ROI across all campaigns.

Forgetting Sunk Costs

You spent £10,000 on a project that's failing. You can invest another £5,000 to salvage it (estimated return: £6,000). Should you? Many people think "I already spent £10k, I can't walk away!" Wrong. The £10k is gone regardless. The question is: Is £5,000 investment for £6,000 return (20% ROI) worth it? (Probably yes).

Not Factoring Ongoing Costs

You buy equipment for £20,000. It generates £40,000 in revenue. ROI: 100%! But wait—it costs £1,000/month to run (power, maintenance, operator wages). Over a year, that's £12,000 in additional costs. True net return: £40k - £12k = £28k. True ROI: 40%.

Confusing ROI with Profit

100% ROI doesn't mean 100% profit margin. If you invest £10k and get back £20k, ROI is 100% but profit is £10k. ROI is about return on the investment itself. Profit is the absolute amount.